by Sapna Maheshwari
Nov. 12 (Bloomberg) -- The Standard & Poor’s 500 Index may drop as much as 15 percent by the end of the year as declines in bank stocks signal an imminent fall, said Mary Ann Bartels, head of technical analysis at Bank of America Corp.
The KBW Bank Index that tracks 24 lenders broke out of a so-called triple top pattern in the past two weeks, suggesting that it has entered a period of decline that will extend to the S&P 500, Bartels said in a telephone interview. The S&P 500, which closed at a 13-month high of 1,098.51 yesterday, may drop to as low as 930 by the end of the year, she said. A triple top, a chart pattern where an asset creates three peaks near the same level, is used by technical analysts to predict the reversal of an uptrend.
"With the banks showing deterioration, my concern is if they continue to deteriorate, that’ll be negative for stocks,"
said Bartels, ranked second among analysts who study price charts in Institutional Investor magazine’s most recent survey.
"Financial stocks have already entered a correction. If we’re correct on that call, the risk is that the equity market corrects with financials."
The KBW Bank Index lost 11 percent in October for its steepest monthly decline since February, while the S&P 500 fell 2 percent. The gauge of lenders from JPMorgan Chase & Co. to Fifth Third Bancorp has decreased 1.3 percent year-to-date, compared with the S&P 500’s 21 percent advance.
"We’re near-term cautious," Bartels said. "We could get a correction, but in the context of an uptrending market." A correction is a drop of at least 10 percent from a peak. She said that the S&P 500 will "eventually" rebound to 1,325 after it tumbles.

50-Day Moving Average

The bank index may signal a rebound if it crosses its average level from the previous 50 days, according to Dan Wantrobski, director of technical research at Janney Montgomery Scott LLC in Philadelphia.
"What the banking index does need to do is stop breaking down," said Wantrobski. "The first thing that I can see that would suggest it’s back on track is a break above its 50-day moving average."
The KBW Bank Index fell below its 50-day moving average on Oct. 21 and hasn’t closed above it since.
In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.

Meredith Whitney Is Bearish As Ever





Meredith Whitney came out in her bear cape today and financials sold off to the close. Here is what he had to say:

"Bank
analyst Meredith Whitney said on Monday she does not believe the U.S.
equities rally is based on fundamentals, and she is as bearish as she
has been this year in the stock market.

In an interview with
CNBC television, Whitney said there is "no way" the banking sector is
well capitalized and it is time to reduce weighting in large-cap banks.
Whitney also said she sees a double-dip U.S. recession." in Reuters

It has helped a bit my shorts as the market reversed from the intradays highs and sold off



agreed...